PBGC Protects Chesapeake Corp. Pension Plan
FOR IMMEDIATE RELEASE
January 14, 2010
WASHINGTON-The Pension Benefit Guaranty Corporation (PBGC) today announced it has assumed responsibility for the underfunded pension plan covering nearly 1,700 workers and retirees of Chesapeake Corp., Richmond, Va., a maker of paperboard and plastic packaging materials for the food, beverage, pharmaceutical and specialty chemical industries.
The PBGC stepped in because the pension plan faced abandonment after the company, in bankruptcy, sold substantially all of it assets to buyers unwilling to assume the plan. Retirees and beneficiaries will continue to receive their monthly benefit checks without interruption, and other participants will receive their pensions when they are eligible to retire.
According to PBGC estimates, the Chesapeake Corp. Retirement Plan is 68 percent funded, with assets of $43.4 million and benefit liabilities of $63.5 million. The agency expects to cover the entire $20.1 million shortfall. The PBGC will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan, which ended on March 23, 2009, when the bankruptcy court approved the asset sale.
Within the next several weeks, the PBGC will send notification letters to all participants in the Chesapeake plan. Under provisions of the Pension Protection Act of 2006, the maximum guaranteed pension the PBGC can pay is determined by the legal limits in force on the date of the plan sponsor's bankruptcy. Therefore participants in the plan are subject to the limits in effect when Chesapeake filed for bankruptcy protection on December 29, 2008, which set a maximum guaranteed amount of $51,750 a year for a 65-year-old.
The maximum guaranteed amount is lower for those who retire earlier or elect survivor benefits. In addition, certain early retirement subsidies and benefit increases made within the past five years may not be fully guaranteed. The Chesapeake plan has been frozen since December 31, 2005.
Workers and retirees with questions may consult the PBGC Web site, www.pbgc.gov or call toll-free at 1-800-400-7242. For TTY/TDD users, call the federal relay service toll-free at 1-800-877-8339 and ask for 800-400-7242.
Retirees of Chesapeake Corp. who draw a benefit from the PBGC may be eligible for the federal Health Coverage Tax Credit. Further information may be found on the PBGC Web site at http://www.pbgc.gov/workers-retirees/benefits-information/content/page13692.html.
Assumption of the plan's unfunded liabilities will have no significant effect on the PBGC's financial statements because the claim was previously included in the agency's fiscal year 2009 financial statements, in accordance with generally accepted accounting principles.
The PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974. It currently guarantees payment of basic pension benefits earned by 44 million American workers and retirees participating in over 29,000 private-sector defined benefit pension plans. The agency receives no funds from general tax revenues. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and by investment returns.
— ### —
PBGC No. 10-20